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Indonesia to start collecting 10 per cent VAT from Netflix, Spotify in July

Movies listed on Netflix. (JG Photo/Dion Bisara). Sketched by the Pan Pacific Agency.

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JAKARTA, May 17, 2020, Jakarta Globe. Indonesia will start collecting 10 percent value-added tax on over the top digital services from abroad on July 1, potentially adding the bills of local customers of movie streaming service Netflix, game distribution Steam, music streaming Spotify and many others, according to the latest regulation from the Finance Ministry made public on Friday (May 15), Jakarta Globe reported.

“Under this regulation, digital products such as streaming music subscriptions, streaming films, digital applications, and games, as well as online services from abroad will be treated in a level playing field as other local products that have been subject to VAT,” the ministry’s Directorate General of Taxes said in a statement on Friday.

According to the regulation, digital business with the number of transactions or number of traffics in a year exceeded a certain threshold, should collect the tax from the customers, and pay the amount collected to the government every month.

The tax office would later determine the threshold and decide which companies or digital services that must collect the tax for the government.

With more than 175 million active internet users, Indonesia has grown to become a key market for the digital economy in the region. But, lack of regulations had constrained government in the past in tapping the sector.

The Finance Ministry has been drawing the plan for several months now, but the Covid-19 pandemic has brought forward the urgency to implement the measure sooner than planned.

“In addition to creating equality between [local and oversea] businesses, collecting the value-added tax on digital products from abroad are also expected to increase state revenue, which currently is a critical source of funding for mitigating Covid-19 economic impact,” the tax office said.

The government plans to spend Rp 405 trillion ($27 billion) in fiscal stimulus for healthcare, social safety net, and subsidies for the businesses to ease the pandemic impact on the Indonesian economy.

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